Yahoo Finance Azeus Systems Holdings (SGX:BBW) Knows How To Allocate Capital Effectively
What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Azeus Systems Holdings (SGX:BBW) looks great, so lets see what the trend can tell us.
Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Azeus Systems Holdings is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.29 = HK$59m ÷ (HK$304m - HK$102m) (Based on the trailing twelve months to September 2023).
Therefore, Azeus Systems Holdings has an ROCE of 29%. In absolute terms that's a great return and it's even better than the IT industry average of 13%.
View our latest analysis for Azeus Systems Holdings
Historical performance is a great place to start when researching a stock so above you can see the gauge for Azeus Systems Holdings' ROCE against it's prior returns. If you'd like to look at how Azeus Systems Holdings has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
What Does the ROCE Trend For Azeus Systems Holdings Tell Us?
Azeus Systems Holdings is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 29%. Basically the business is earning more per dollar of capital invested and in addition to that, 116% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
What We Can Learn From Azeus Systems Holdings' ROCE
All in all, it's terrific to see that Azeus Systems Holdings is reaping the rewards from prior investments and is growing its capital base. And a remarkable 2,956% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Azeus Systems Holdings can keep these trends up, it could have a bright future ahead.
One more thing, we've spotted 2 warning signs facing Azeus Systems Holdings that you might find interesting.
Azeus Systems Holdings is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
